PayPal is moving further into traditional banks’ territory, with new figures revealing it has grown its total financing values for small businesses in the UK by 56% over the past year. The American tech giant credits its success to its technology and the fact that it isn’t hampered by office hours.

PayPal, which operates as a payment processor for online vendors and e-commerce sites such as eBay and Shopify, released its most recent figures this week, disclosing that its total value of cash advances issued in the UK has now reached £625mn, up from £400mn in June 2017.

In a statement, the firm says the figures “demonstrate the ongoing need for alternative financing that bridges the gap left by traditional funding providers”.

Through its financing arm, PayPal Working Capital, the company offers cash advances of up to £100,000 in the UK against a business’ future sales, via an online application. Approvals are based on PayPal sales history, meaning that no credit checks are run against the business. Repayments are taken as a fixed percentage of a business’ PayPal takings when they make sales, with no interest.

Since its launch in 2014, PayPal Working Capital has extended £3.6bn-worth of financing to more than 30,000 UK businesses.

PayPal credits its recent growth to its use of technology and extensive data “to bypass the lengthy application process of traditional business finance”, and instead offer a “faster, digital alternative” for small businesses.

“As PayPal knows the applicant’s business, we typically approve and issue a cash advance in minutes. The business owner can spend the time saved on what really matters: running their business,” says Norah Coelho, director of business financing at PayPal UK.

The demand for fast and flexible access to finance is high, PayPal says, and the evidence is clear: 70% of its advances issued in the past year were outside traditional bank branch hours.

The figures are backed up by Aaron Flanagan, the owner of Comic Book Guys, one of the small UK businesses to have benefited from this alternative funding. He says PayPal’s solution gave him access to funds in the same evening as the application was made online, as opposed to what he was offered by his conventional bank: “Interest rates were high and the application process was intense – as a small retailer, you don’t have the time for all those forms.”

The growth is not surprising in a time when the world’s tech giants are increasingly expanding into new sectors. As reported by GTR in its recent fintech feature, conventional trade finance providers have good reason to be concerned about competition from large technology firms such as Amazon, PayPal and Alibaba.

According to a report by the World Economic Forum, these “high tech” companies are currently causing the greatest disruption to traditional banks’ value propositions, much more so than fintech startups.

With huge amounts of data about their customers, the funding to rapidly increase their scale and international reach, and having already harvested great trust amongst their users, the tech giants are perfectly placed to provide banking services.

This also includes business lending: mastering new technologies such as machine learning, big data and APIs, they have the ability to make sophisticated risk assessments and thus provide innovative and flexible solutions to small businesses.

Amazon and Alibaba, together with PayPal, are all examples of tech giants that have established lending arms to target their own merchants. Amazon, for one, has said it aims to “bring the one-click shopping experience to lending” through its Amazon Lending programme. Last June, the internet giant announced it had originated US$3bn in loans, US$1bn over the previous 12 months, benefitting more than 20,000 small businesses.

According to Chris Skinner, an independent commentator on financial markets and fintech, the future will undoubtedly see the tech giants move further into the traditional banks’ territory – where it helps them grow their online business. Trade finance is an obvious target.

“All trade or supply chain finance or commercial or retail banking that involves any payment or credit is where they are going to focus. Because it helps get more buying and selling on their platform. This is where the banks should fear these internet giants,” Skinner tells GTR, saying that this will leave banks to “continue what they are doing, but getting much less margin and profits”.

The traditional banks, however, seems more dismissive about the threat from the tech giants.

Michael Vrontamitis, head of trade for Europe and Americas at Standard Chartered, denies the notion that tech giants will take away his business, noting that “large companies have used the extension of finance to support their core business for generations”.

“Infrastructure companies like GE and Siemens, or technology companies like IBM, Oracle, etc, actively support their clients through financing solutions to enable the sale of their product solutions. For me, tech platforms like Amazon and Alibaba are doing the same thing,” he tells GTR.

At PayPal, Coelho also doesn’t buy into the notion that tech giants will pose a direct threat to banks.

Speaking to GTR recently, she said that “banks will continue to play a pivotal role in the future of business funding” and emphasised that PayPal is “a partner to banks, not a competitor”.

“We’re already working closely with over 20 of the largest credit card issuers in the world, the majority of which have kicked off campaigns to encourage and, in many cases, incentivise their customers to engage with PayPal,” she said.

Read more about the threat of tech giants in GTR’s recent fintech feature Techbanks: Poaching trade financiers’ territory.